Search

Search engine giant Google (NASDAQ:GOOG) has managed to irk online travel agencies by displaying search results of its own travel tool above other online travel agency portals. Though Google started using the search tool in the beginning in December, it garnered and received media attention only now; probably because online travel portals such asExpedia (NASDAQ:EXPE), Kayak, Orbitz WorldWide(NYSE:OWW), and Priceline (NASDAQ:PCLN) are experiencing reduced traffic on their website. In a nutshell, Google now directs the user directly to the airlines’ website rather than to a middleman.

The Conventional Way

Google plays an important role in online travel bookings revenue. Google, just few months back, had managed to get rid of low quality websites by tweaking its search algorithm. These low quality websites, using black hat techniques, managed to fool the search engine rankings providing users with irrelevant and paid information.

Before the new tool was put to use, whenever a user or a potential customer used to search for flight options between two destinations, the search engine results displayed paid results on the top followed by organic rankings of leading service providers. The user thus was directed to one of the travel agencies enabling the middleman to earn revenue whenever a booking was made. But now, rather than providing links to the travel agency, Google directs the user to the airlines website.

The Tussle

Online travel agencies are irked because they receive around 20-30 percent of their traffic – and revenues – with the help of Google. The airlines though are pleased because they no longer have to pay the middlemen the commission charges if the booking is made through them. It is estimated that a ticket purchased through an online travel agency costs $10 less for an airline. The carriers thus are arguing that if that money can be saved, they can pass on the benefits to the customers. The customers too are not complaining because this new flight-search feature by Google is providing them with tickets that are cheapest in the market, which might not be the case if they book it through one of the travel sites, legitimate or not.

ITA Acquisition

Google is able to provide the cheapest flight information because of the acquisition of ITA Software Inc. it made a few months ago. The company specializes in acquiring flight price data from airlines. Google now is using tools developed by the company to display its own results. Google, in its defense, is saying that it is not trying to monopolize the online travel industry. According to Google, airlines have refused to part way with flight price data if Google places travel agency results above the airline portal links. The ITA acquisition was marred with controversies since ITA’s competitors feared that Google may use ITA for squashing competition. An antitrust suit followed; however after Google made assurances to the Department of Justice, the tables were turned in Google’s favor clearing the acquisition.

It looks like those fears have turned out to be true from the viewpoint of ITA’s competition. There is one solution, legitimate travel sites, like the ones mentioned above, should pay Google more or offer them more of an incentive to refrain from this seemingly new Google practice.

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